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What is the Feed-In Tariff?
Post By: Amrut Solar
APRIL 13, 2021
Simply put, feed in tariffs are a medium of transaction for electricity. When you install a solar system and produce your own energy, you use that energy and save your electricity bills. In addition, often your system may produce more energy than required by you, that extra energy is sent back to the national power grid and for that you receive certain payback. These paybacks and such credits are feed-in tariffs.
Australia had state mandated feed-in tariffs with fixed rates but that is no longer the case. Now the retailers have free hand and they offer their own choice of voluntary feed-in tariffs. These feed-in tariffs don’t have to be paid tax on, unless it is a huge quantity in case of businesses or such consumers. In most cases it is categorised as personal use or hobby and hence no tax is applicable.
Feed-in tariffs are to encourage renewable energy generation and consumption, the mechanism is measured in kilowatt per hour units. All states of Australia have various feed-in tariff rates due to electricity retailers’ free hand in the matter. In the beginning the electricity used by consumers had less value than the energy sent back to the grid but now it's the opposite. Although it is still a financially smart move to consider feed-in tariffs.
It was the USA that first introduced the FiTs, in 1978 Carter administration implemented feed-in tariffs in response to the energy crisis. And since then more than dozens of countries worldwide have adopted them in effort to develop and promote renewable energy consumption. Around ¾ of global solar energy is linked with FiTs.
FiTs scheme is applicable on:
- Solar panels
- Wind turbines
- Hydro turbines
- Anaerobic digestion
- Micro-combined heat and power (micro-CHP)
STCs and FiTs
When installing solar systems you may hear the term STCs which is Small scale Technology Certificates. Your STCs eligibility depends on your geographic location, your system’s capacity and the deeming period. These STCs help you reduce the cost of installation significantly. But FiTs are all about after-installation bills. With FiTs you can get significant expense reduction in your monthly electricity bills.
According to Section 40F of the Electricity Industry Act 2000,
- Any Solar PV systems that are installed on a household, school, community organisation or small businesses.
- Solar PV systems that are connected to the grid within the National Energy Market (NEM)
-are eligible for feed-in tariffs.
- The dependency on fossil fuels imported from foreign countries, decreases.
- The consumers are encouraged to switch to renewable energy sources, helping the environment.
- Encourages people to be conscious about excess electricity use
- Solar energy ensures zero contribution to pollution
- Financially a better and smart move towards personal economic affairs